The SMSF administrator’s principal, David Busoli, told sister title SMSF Adviser that investment strategy documentation was too often left to the trustee’s accountant, who lacked the skills or administrative tools to cover off this aspect of superannuation law.
“It should not be the client’s accountant who is doing them; it’s the provenance of the adviser and the trustees. It shouldn’t be something that pops out of the accounting software as an automated piece of paperwork because it’s something that needs to be considered,” Mr Busoli said.
“The standard strategies spat out of the various software providers are inadequate — they are nothing more than a regurgitation of the rules, a bland statement that says we’ve satisfied them and an asset allocation somewhere between zero and 100 per cent.
“That is not what legislators had in mind when they said there has to be a clear investment strategy for an SMSF.”
As a result of this lack of adequate documentation, Mr Busoli said many of the 17,700 funds the ATO had identified as having a high weighting to a single asset may be in danger of administrative penalties as a result of the office’s forthcoming crackdown.
“The fact the strategy document is inadequate doesn’t necessarily mean they haven’t considered the lack of diversification, but if the strategy isn’t documented, that is a breach,” he said.
“The investment strategy may not have been regarded as seriously as it should have been, because where a financial planner is involved, a statement of advice covers what is required in the strategy, but it is not adequate to satisfy the requirements in terms of a document called an investment strategy.”
Mr Busoli said for SMSF professionals concerned that their clients fell into this category of highly concentrated funds, they would need to take steps to rectify their investment documentation and could make use of SMSF Alliance’s strategy templates for advisers.
“Presuming the trustee has considered the lack of diversification, I would think the ATO would look favourably on them documenting the reasons why they felt the investment was justified and doing so in a form which satisfies the requirements of an investment strategy,” he said.
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